Opinion: China’s Weak Underbelly

Author and financier Timothy Beardson on his new book, "Stumbling Giant: The Threats to China’s Future." Photo: Getty Images

This transcript has been automatically generated and may not be 100% accurate.

... I ... back to Opinion Journal I'm Mary Kissel ... yours of a certain age may remember Ezra Mobile's up Japan as Number one ... which predicted that Japan is going to take over the world in the nineteen eighties ... it didn't exactly turn out that way and my next guest says the same might be true ... of predictions that China is pre ordained to take over the global economy ... the Financiere Timothy person the author of stumbling giant ... the threat to China's future is here ... I it's it's in the child liberalize its economy open to trade lifted ... off hundreds of millions of people out of poverty ... by adopting capitalism to an extent ... leasing an economic model is broken ... why ... the main reason that he is demography ... China faces a huge demographic problem ... he comes in for features ... the first one is that the labor force has no stock in two regions ... as result we choose to rising by double digits in the yen weakened China markets compared to ... the second thing is that China is a brief ups ... hundred million people ... above sixty five know ... that bite twenty fourteen and beyond ... it could be ... of ... the sixty five ... that's issued strain on the budget and on healthcare costs ... the third challenge is gender disparity ... six boys born for every five goes to the last week he has one child policy is won't because it references employees says that goes in Chinese rule society ... and tools to ... Coke is expensive people do want to make children anyway ... so you go shoot inbuilt ... so this man ... probably forty to fifty million in the next twenty years to when and why ... that means ... crime is rising ... and social instability is away from the last last challenge is ... the whole population China but pretty principal will peak and start to fall ... and it falls somewhere between referred them to ... school that did the full cost ... the new society in history that has had a foreign population ... has been able to sustain high income agreed ... to buy the twenty third is ... look for China to a blue grey ... Dowd's or wanted to know trends over ten twenty thirty years ... let's talk a little bit more short-term specifically the reaction to the tothe say economic crisis China decided ... to turn away ... from that capitalists Malo antics torturing money back into the state-owned ... enterprises to set play a role too in the near term ... as they put money towards the government cannot force private enterprise which ... China has the financial system It's dysfunctional ... two-thirds of the Chinese economy's private sector ... the two thirds of the bank could be used to the States ... the six percent of the stock market is the state sector ... it's not surprising that on Friday night the Chinese stock market clues to where it is in two thousand won ... twelve years ago ... and yet we keep being told is going into this India ... economy in the stock market a new relationship ... recently things that need to be reformed if China's can become sicker and ... extraordinary on it we are told about that ten percent growth Emirates slowed in recent years ... which was coming from a very low base ... they are in the Chinese workers in the economy at large are able to innovate and to move up to to maintain that level of growth ... and if not within the barriers to doing ... the problem with the Chinese government's move towards an innovation economy ... is to really somehow ... seventy percent of the spending on R and D use by the state sector ... most academics will see the private sector has to spend on R and D no state if you want a good market in results ... if you look at ... what his community China ... a few creeps in high tech products are made by foreign companies like American companies in China ... says this economy benefits ... China or America ... China is getting very little out of this ... I always out the trees a zero sum game here at the Wall Street Journal editorial page ... but there are definitely concerns about the Chinese growth is Chinese innovation ... aam was out the if the environment ... and those concerns and how that's impacting companies in China ... and ultimately grow one ... of China's environment some for can be used to works of any ... major economy in the well ... in terms of ... who should be an award to the soil ... indeed the Food Safety Che ... I'm pollution is a balm didn't ... really know because of the lack of rules that because of lack of implementation rules in China ... China has huge problems with dolphins ... the house to reform its governments ... boy it's gotten a conical has asked the speaking of government still one party state so there's no free press not really an Geo's those kinds of things ... in this country at least ... by ... us and check on government that that there's high hopes for this new leadership ... I do you think that there are reformists in the in the mold of things happening in the eighties ... due to pain was a man with enormous Coastal charisma golf course he ... is pretty hard for collective leadership like China has had the last thirty years ... to really ... stand out and see we can return the supertanker around ... promoted vested interests have to be confronted her cause a moment current ... mystery Hartford guy has come up with the bureaucracy to have the courage to stand up to the system and Statehouse to chainsaws government by consensus within this a lease of the Communist ... Party ... well it was is six months the year ... why do you see in ... the financial crisis in the future and decently Stephen plodding along with the six seven percent ... I think the most likely result is China will get called more common the school to middle income trap and ... it ... will collapse ... it would overtake America it'll get stock like among South American country is the did very well in the sixties know this and this ... I think they will get stock ... in this respect courage to reform BP radically and ... I just didn't see that coverage coming ... ok well not a good outlook for China but silent ... I wanna say it's encouraging for the global economy because we want a strong China strong economic growth has yet to make the person thank you so much going on in Asia ...